Pension News - FABF

FROM THE SECRETARY (cont.)
from state grants that would otherwise go to the city to the Firemen’s Annuity and Benefi t Fund or the Policemen’s Annuity
and Benefi t Fund to remedy any divergence from the 90% funding requirement.
As welcome as the news is that the city is now required to fund their longstanding debt to OUR participants’
retirement system, it remains a tragedy that the city’s current taxpayers will bear the impact of tax increases and revenue
shifting far greater today than what it would have been if legislators seriously considered their obligations to the city
employee’s retirement systems.
The administration and our legislators do not like to be reminded that fi refi ghters, paramedics and police offi cers
are not covered by Social Security and that the city does not make the employer’s contribution to Social Security on their
behalf. Nor do they remember that the city does not pay for Illinois State Workers Compensation for our members other
than for burns to exposed skin. For thirty plus years, the city benefi ted from an antiquated funding mechanism not based
on the actuarially expected future costs of retirement and widow benefi ts. Additional revenue was not provided by the city
for costs associated with duty disability, occupational disability, and duty death widow benefi ts. This shortfall of required
funding occurred with the full knowledge of the city. The fi re fund has advised the city each year that the amount of
funding provided is grossly inadequate to pay for the current and future benefi ts constitutionally required to be paid by our
fund to participants.
Recently we all heard about the proposal the city put forward to the Chicago police sergeants that included a three
percent increase in employee contributions along with a drastic reduction to the amount of funding required under PA 96-
1495. The funding reduction contained in this proposal would be devastating to our fund. The Firemen’s Fund currently
has an annual $130 million dollar net cash outfl ow. This means we are paying $130 million more in annual benefi ts than
the total of both employer and employee contributions. That defi cit has been growing by at least $20 million each year. The
proposal offered to the police sergeants reduced the actuarial funding starting in 2016 to a meager 10% annual ramp to the
city’s current funding amounts for the next seven years. The actuarial funding model would kick in after that seven year
period. Unfortunately, given the existing level of benefi t payouts, our fund could easily be as low as 10% funded before the
city would be required to begin paying down the unfunded obligation. The proposal refl ects the same shortsighted mindset
that is to blame for the current underfunded status. It is frustrating to see these proposals being offered as viable solutions.
The sergeants’ proposal also included a reduction to members’ automatic annual increases or cost of living
adjustments (“COLAs”). The participants of the Police and Firemen’s funds already have one of the lowest COLAs in the
state. Members of these funds born before 1955 are entitled to a 3% simple COLA while members born in or after 1955 are
only eligible for 1.5% simple COLA. Most, if not all other plans in the state and the city have 3% compounded COLAs
for all members. Much discussion concerning the ability of any proposal containing reductions to future benefi ts has been
dedicated to the legislators’ concerns about the Pension Protection Clause of the Illinois state constitution. Legislators
want to be certain that any proposal that might ultimately be passed and signed into law will not be undone by future court
challenges. However, given the current proposals, it appears that court is where we are all destined to have these issues
resolved.
Recently, the Chicago Sun-Times, looking to blame employees for the city’s pension mess made numerous requests
for participant information under the Illinois Freedom of Information Act. Fund staff spent many hours responding to
several inquiries submitted by the Chicago Sun-Times concerning our members in receipt of disability benefi ts. Based on
their reporting, it appears that they assumed that our disability recipients were abusing the system and were a contributing
factor to our pension system’s woes. Their published stories focused on two participants receiving duty disability benefi ts.
The fi rst disability recipient the Sun-Times focused on in their story was initially denied benefi ts by the Retirement
Board. That denial was subsequently overturned by the Appellate Court despite compelling videotape surveillance obtained
by the Board in its process of determining eligibility. The Sun-Times even posted this video surveillance on its website as
part of their story. Any questions concerning the duty disability benefi t granted to this member should be referred to the
appropriate court personnel.
The second participant was granted duty disability benefi ts because of a shoulder injury and subsequent surgery.
After several surgeries on the same shoulder and extensive rehabilitation, two Board appointed doctors concurred with
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